Big wasn't beautiful on Thursday.

Shares in the largest U.S. companies, including Citigroup Inc., General Electric Co., JPMorgan Chase & Co. and Wal-Mart Stores Inc., suffered their biggest single-day drop in several years.

The declines were remarkable because in times of extreme volatility such as financial markets have recently experienced, the largest and most diversified companies are seen as one of the safest places to hide.

No more.

The cause could stem from hedge funds slashing their portfolios and selling their most liquid names to meet what many market experts expect to be massive redemption demands given recent market volatility.

Part of the reason you saw the GEs and P&Gs and stocks like that getting crushed today is that those were relatively liquid stocks, billionaire financier Wilbur Ross Jr. told

CNBC.

Those were things the hedgies could sell because a lot of them know they need to build up cash reserves to deal with what probably will be some big redemptions, he added.

Bob Doll, vice chairman and chief investment officer of global equities at money manager BlackRock Inc., said hedge fund redemptions might be behind the large-cap rout.

That could be part of what is happening, but one day does not make a trend. I sure wouldn't put my hat on it, he said.

According to Ross, August 15 is the day for September 30 redemptions for hedge funds that have 45-day advance notice.

LARGE-CAPS VS SMALL

The decline in large-cap names was vicious. Home Depot fell 5.32 percent, its biggest drop since March 2003; Citigroup tumbled 5.23 percent, its worst fall since September 2002; General Electric slumped 3.76 percent, the most in 18 months; JPMorgan stock was off 5.03 percent, its worst decline since January 2003 and Wal-Mart fell 4.07 percent, its worst since November 2003.

Major U.S. indices fell almost 3 percent after French bank BNP Paribas halted withdrawals from three funds and the European Central Bank pumped a record 94.8 billion euros ($130 billion) into financial markets to stop them from seizing up.

You had a panic in Europe, with the ECB putting so much liquidity into the system, everybody thought, 'Gee, am I the greater fool here? Do they know something that we don't?' said David Goerz, chief investment chief at HighMark Capital Management.

The sell-off in large-caps might be viewed as surprising, since many investors have said they are primed for better earnings as the economy slows. But hedge funds could be looking to lock in profits from recent gains in large-cap stocks, while simultaneously raising cash reserves for redemptions.

Surprisingly, small-cap stocks, typically the first to get caught in a market meltdown, have been up on the week. But small-caps are relatively illiquid and can be difficult to sell profitably in large amounts during a sharp downturn.

The Russell 2000 is up 3.9 percent this week through Thursday and down just 0.4 percent for the year.

The Dow Jones industrial average is up on the week as well, but by only about 0.7 percent, and 6.5 percent for the year.

Investment Citigroup Jpmorgan chase